#Real Income Doctrine

Bombay High Court holds that only the actual income retained after refunding excess royalties under an Advance Pricing Agreement is taxable under Article 12 of the India-US DTAA. The ruling rejects the Revenue’s attempt to tax notional amounts, reinforcing the real income principle in international taxation and providing relief to multinational enterprises facing transfer pricing adjustments.

ITAT Bangalore rules that duty drawback income is taxable only upon actual receipt, not mere accrual at export. The tribunal also quashed penalties under Section 270A, holding no misreporting occurred where the assessee followed the cash accounting method. A key precedent for exporters on taxability of export incentives.